| --- | --- | --- | --- | --- | |------------------------------------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | Q3 FY2023 | | | | | | DECEMBER 2022 EARNINGS SUPPLEMENT | | | | | DISCLAIMER FORWARD LOOKING STATEMENTS This document includes statements that are, or may be deemed to be, "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be ...

| --- | --- | --- | --- | --- | |-------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | DISCLAIMER FORWARD LOOKING STATEMENTS This document includes statements that are, or may be deemed to be, "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created by those laws. All statements, other than statements of histo ...

Skillsoft Corp. (NYSE:SKIL) Q2 2023 Earnings Conference Call September 7, 2022 5:00 PM ET Company Participants Eric Boyer - Head, Investor Relations Jeff Tarr - Chief Executive Officer Gary Ferrera - Chief Financial Officer Conference Call Participants Sheldon McMeans - Barclays Ken Wong - Oppenheimer Raj Sharma - B. Riley Lucky Schreiner - D.A. Davidson Arvind Ramnani - Piper Sandler Operator Thank you for standing by and welcome to Skillsoft Second Quarter Fiscal 2023 Results Conference Call. [Operator In ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 2022 or ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT Delaware 83-4388331 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 300 Innovative Way, Suite 201 Nashua, New Hampshire 03062 (Address of pri ...

Financial Data and Key Metrics Changes - In Q1 2023, total company bookings were $125 million, down 5% year-over-year, with a flat year-over-year performance when excluding the sum total segment [27] - Combined GAAP revenue was $164 million, while adjusted revenue was $170 million, up 1% over the prior year [28] - The GAAP net loss for the quarter was $22 million, and adjusted EBITDA was $3 million, down 12% year-over-year [29][30] - Cash balance decreased to $76 million from $155 million at year-end, primarily due to the acquisition of Codecademy [31] Business Line Data and Key Metrics Changes - Bookings for the Skillsoft content segment increased by 22% year-over-year to $51 million, driven by new customers and a dollar retention rate of 101% [32] - Global Knowledge bookings decreased by 15% year-over-year to $56 million, attributed to its transactional nature and sensitivity to macroeconomic conditions [33] - Sum total bookings were $19 million, a decrease of 26% due to a large contract loss in the payroll business [34] Market Data and Key Metrics Changes - The content segment is expected to be the main driver of future value creation, while Global Knowledge is more sensitive to macroeconomic headwinds [11][21] - The company is experiencing strong demand for its transformative learning experiences, with a focus on addressing skills gaps in the workforce [15] Company Strategy and Development Direction - The acquisition of Codecademy is expected to enhance the tech and development offerings, creating one of the largest communities of learners globally [13] - The company aims to transition more of its business to subscription revenue, embedding instructor-led training into subscriptions and cross-selling offerings [22] - The focus is on improving the performance of Global Knowledge while maintaining growth in the higher-margin content subscription business [24] Management's Comments on Operating Environment and Future Outlook - Management noted that macroeconomic factors have impacted Global Knowledge, with a quantification of about 50% of the shortfall attributed to macro conditions and 50% to staffing issues [62] - The company is optimistic about the performance of the content segment but is tracking towards the low end of its bookings and revenue outlook due to Global Knowledge's slower start [36] - Management expressed confidence in addressing staffing challenges and launching new products to improve Global Knowledge's performance in the second half of the year [44][62] Other Important Information - The company has made significant investments in new content, totaling $120 million over the last four years, contributing to the growth of its subscription business [19] - The engagement on the Percipio platform has reached an all-time high, with a notable increase in the issuance of blockchain-based digital badges [68] Q&A Session Summary Question: Impact on Global Knowledge and macroeconomic conditions - Management explained that Global Knowledge is transactional and sensitive to macroeconomic conditions, particularly in Europe, affecting demand and sales [42][43] Question: Confidence in maintaining performance in sum total - Management indicated that while the Learning Management System (LMS) business is performing well, the legacy human capital management modules have faced challenges due to losing a large customer [45] Question: Cross-sell opportunities with Codecademy - Management confirmed strong interest from enterprise customers in the Codecademy offering, which is being sold as an add-on to existing subscription products [46] Question: Global Knowledge revenue decline and guidance - Management quantified that about 50% of the decline in Global Knowledge is due to macroeconomic factors, with the other half related to staffing issues [62] Question: Engagement levels on the Percipio platform - Management reported increases in usage on the Percipio platform, with high engagement levels and a significant number of digital badges issued [68]

Q1 FY2023 Highlights - Adjusted Revenue was $170 million[14] - Content Bookings grew 31% year-over-year[14] - Adjusted EBITDA was $33 million[14] - Content Dollar Retention Rate was 101%[14] - Content Bookings grew 22% year-over-year on a pro forma basis[14] - Adjusted EBITDA Margin was 19%[14] FY2023 Outlook - Bookings are trending towards the low end of the $790 million to $825 million range due to softness within Global Knowledge[16] - Adjusted Revenue is trending towards the low end of the $765 million to $790 million range due to softness within Global Knowledge[16] - The company expects to deliver Adjusted EBITDA of approximately $167 million[16] Capital Structure - Total Debt was $665 million[18] - Cash was $76 million[20] - Net Debt was $589 million[23] - Net Debt / Pro Forma LTM Adjusted EBITDA was 41x[25]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 2022 or ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File Number: 001-38960 Skillsoft Corp. (Exact name of registrant as specified in its charter) Delaware 83-4388331 ...

Part I [Business](index=7&type=section&id=Item%201.%20Business) Skillsoft is a global leader in corporate digital learning, serving over 75% of the Fortune 1000 with AI-driven platforms and content, operating in a growing market driven by upskilling needs - Skillsoft is a global leader in corporate digital learning, serving over **75% of the Fortune 1000** and more than **90 million learners globally** through its primary solutions: Percipio, Global Knowledge, Codecademy, Pluma, and SumTotal[18](index=18&type=chunk) - The company operates in three main segments: Content, Global Knowledge, and SumTotal[31](index=31&type=chunk) Corporate Digital Learning Market Overview | Metric | Value/Rate | | :--- | :--- | | Global Professional Digital Learning TAM (2021) | ~$28 billion | | Anticipated CAGR through 2025 | ~10% | | Global HCM Market Size | ~$17.6 billion | | Anticipated HCM Market CAGR | ~7% | - A key strategic focus is migrating customers to the AI-driven Percipio platform, with approximately **90% of the content segment's annual recurring revenue base** contracted for Percipio as of January 31, 2022[38](index=38&type=chunk) - Skillsoft acquired Codecademy on April 4, 2022, to enhance its Technology & Developer offerings[61](index=61&type=chunk) - The business experiences significant seasonality, with the fourth quarter representing about **40% of annual bookings volume**[60](index=60&type=chunk) [Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse risks including global economic conditions, intense competition, system disruptions, acquisition integration challenges, significant leverage, and shareholder influence - Business operations are susceptible to adverse global economic trends, public health crises, and geopolitical events, which could reduce demand for training products[64](index=64&type=chunk)[74](index=74&type=chunk)[84](index=84&type=chunk) - The corporate learning market is highly competitive and fragmented, potentially leading to price reductions, reduced revenue, and loss of market share[90](index=90&type=chunk)[91](index=91&type=chunk) - The business is vulnerable to system disruptions, security breaches, and cybersecurity attacks, which could lead to customer loss, reputational damage, and significant liabilities[103](index=103&type=chunk)[105](index=105&type=chunk)[108](index=108&type=chunk) - The company may be unable to successfully integrate Codecademy's business or achieve anticipated merger benefits, potentially impacting results if expanded operations are not managed effectively[72](index=72&type=chunk)[178](index=178&type=chunk)[179](index=179&type=chunk) - Significant leverage could adversely affect operations, limit flexibility, and expose the company to interest rate risk, with debt agreements containing restrictive covenants[160](index=160&type=chunk)[161](index=161&type=chunk) - Major shareholder Prosus holds approximately **37.5% of the voting power** of Skillsoft's Class A common stock as of April 11, 2022, potentially exerting substantial influence[210](index=210&type=chunk)[212](index=212&type=chunk) [Unresolved Staff Comments](index=69&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - None[215](index=215&type=chunk) [Properties](index=69&type=section&id=Item%202.%20Properties) The company's U.S. headquarters are in Nashua, New Hampshire, and worldwide in Dublin, Ireland, with other facilities in North America and India, deemed adequate for current needs - The company's U.S. headquarters are in Nashua, New Hampshire, and its worldwide headquarters are in Dublin, Ireland[216](index=216&type=chunk)[217](index=217&type=chunk) - Management believes existing facilities are adequate for current needs and suitable additional space will be available if required[218](index=218&type=chunk) [Legal Proceedings](index=69&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 14 of the Consolidated Financial Statements - The company incorporates information regarding legal proceedings by reference to Note 14 of the financial statements[219](index=219&type=chunk) [Mine Safety Disclosures](index=69&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[220](index=220&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=70&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Skillsoft's Class A common stock trades on the NYSE under "SKIL," with 164 stockholders of record as of April 11, 2022, and no anticipated cash dividends - The company's Class A common stock trades on the NYSE under the symbol "**SKIL**"[223](index=223&type=chunk) - As of April 11, 2022, there were **164 stockholders of record**[223](index=223&type=chunk) - The company has never declared or paid cash dividends and does not anticipate paying any in the foreseeable future, intending to retain earnings for growth and debt obligations[224](index=224&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=70&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses Skillsoft's financial condition and results, including the Global Knowledge and Codecademy acquisitions, presenting non-GAAP combined results for comparability, and detailing liquidity and fresh-start accounting - On June 11, 2021, the company completed a business combination with Software Luxembourg Holding S.A. and acquired Global Knowledge, operating as Skillsoft Corp[226](index=226&type=chunk) - The company acquired Codecademy on April 4, 2022, for approximately **$390.3 million** in stock and cash[227](index=227&type=chunk) Non-GAAP Combined Financial Results (Fiscal Year Ended Jan 31) | (In thousands) | 2022 | 2021 | | :--- | :--- | :--- | | **Total revenues** | **$567,390** | **$382,619** | | Operating loss | ($79,891) | ($428,982) | | Net (loss) income | ($96,070) | $2,670,290 | - The **48.3% increase in total revenues** in fiscal 2022 was primarily driven by the inclusion of **$132.6 million** in revenue from the Global Knowledge acquisition, with prior year revenue impacted by a fresh-start accounting adjustment[248](index=248&type=chunk) - As of January 31, 2022, the company had **$154.7 million in cash and cash equivalents** and access to a **$75.0 million accounts receivable facility**[280](index=280&type=chunk)[288](index=288&type=chunk) - In July 2021, the company entered into a new **$480 million term loan facility** to refinance existing debt, maturing in July 2028[281](index=281&type=chunk) - The company adopted fresh-start accounting on August 28, 2020, following its emergence from Chapter 11, materially impacting financial statement comparability[297](index=297&type=chunk)[436](index=436&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=98&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not applicable as the company qualifies as a smaller reporting company - Not applicable as a smaller reporting company[333](index=333&type=chunk) [Financial Statements and Supplementary Data](index=99&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for fiscal year 2022, including balance sheets, income statements, and cash flows, presented for "Successor" and "Predecessor" periods due to bankruptcy emergence and acquisitions, with detailed notes Consolidated Balance Sheet Highlights (as of Jan 31) | (In thousands) | 2022 (Successor) | 2021 (Predecessor) | | :--- | :--- | :--- | | **Total Assets** | **$2,221,948** | **$1,545,737** | | Cash and cash equivalents | $154,672 | $71,479 | | Goodwill | $871,504 | $495,004 | | **Total Liabilities** | **$1,162,050** | **$965,768** | | Deferred revenue | $332,853 | $260,584 | | Long-term debt | $462,185 | $510,236 | | **Total Shareholders' Equity** | **$1,059,898** | **$579,969** | - The company adopted fresh-start reporting effective August 27, 2020, upon emergence from Chapter 11, making financial statements after this date not comparable to prior periods[341](index=341&type=chunk)[437](index=437&type=chunk) - Note 5 details business combinations, including the acquisition of Skillsoft Legacy for **$832.7 million** and Global Knowledge for **$258.5 million**, with preliminary purchase price allocations provided[469](index=469&type=chunk)[478](index=478&type=chunk) - Note 22 provides segment information, breaking down revenues and operating loss/income for the Skillsoft, SumTotal, and Global Knowledge segments[616](index=616&type=chunk)[621](index=621&type=chunk) [Controls and Procedures](index=201&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of January 31, 2022, with no material changes to internal control over financial reporting - Based on an evaluation as of January 31, 2022, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[655](index=655&type=chunk) - There were no changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, internal controls[656](index=656&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=202&type=section&id=Item%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) This section provides biographical information for Skillsoft's directors and executive officers, detailing the nine-member staggered board, its independent majority, and three standing committees, along with adopted governance guidelines - The report lists the **nine members of the Board of Directors** and **ten executive officers**, including CEO Jeffrey R. Tarr[661](index=661&type=chunk)[662](index=662&type=chunk) - The Board is divided into three classes serving staggered three-year terms, which can increase the time needed to change a majority of the Board[693](index=693&type=chunk) - The Board has determined that a majority of its directors are independent, with the Audit, Compensation, and Nominating and Governance committees composed entirely of independent directors[695](index=695&type=chunk)[696](index=696&type=chunk) [Executive Compensation](index=217&type=section&id=Item%2011.%20Executive%20Compensation) This section details fiscal year 2022 compensation for Named Executive Officers, including base salary, bonuses, and equity, with CEO Jeffrey R. Tarr's total compensation at approximately $28.6 million, and bonus payouts adjusted by discretion FY 2022 Summary Compensation for Named Executive Officers | Name and Principal Position | Salary ($) | Stock Awards ($) | Option Awards ($) | All Other Comp. ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | **Jeffrey R. Tarr**, CEO | $477,273 | $21,500,000 | $3,330,000 | $2,916,668 | $28,586,524 | | **Gary W. Ferrera**, CFO | $220,455 | $2,362,189 | $1,332,996 | $317,055 | $4,232,745 | | **Apratim Purakayastha**, CTO | $450,000 | $2,496,150 | $865,060 | $381,838 | $4,192,650 | - The fiscal 2022 annual cash bonus was based on a Bookings target of **$739 million**, resulting in a **76% payout**, though the Compensation Committee exercised discretion to approve a **100% payout** for certain executives[715](index=715&type=chunk)[716](index=716&type=chunk) - The company maintains the 2020 Omnibus Incentive Plan for granting equity awards to align interests with long-term shareholder value[719](index=719&type=chunk)[720](index=720&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=232&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section discloses beneficial ownership of Skillsoft's Class A common stock as of April 7, 2022, with MIH Learning B.V. (Prosus) and Churchill Sponsor II LLC as the two largest owners holding a majority of voting power Principal Stockholders (as of April 7, 2022) | Name of Beneficial Holder | Number of Shares | Percentage of Shares | | :--- | :--- | :--- | | MIH Learning B.V. (Prosus) | 77,916,895 | 43.4% | | Churchill Sponsor II LLC | 33,550,000 | 18.7% | - Beneficial ownership is based on **162,911,755 shares** of Class A common stock outstanding on April 7, 2022[744](index=744&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=236&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) This section details significant related party transactions, including business combinations with Churchill and Global Knowledge, and the Codecademy acquisition, involving major shareholders like Prosus and affiliates, with advisory fees paid to The Klein Group - The consummation of the Skillsoft and Global Knowledge mergers on June 11, 2021, involved complex transactions with related parties, including PIPE investments from MIH Learning B.V. (Prosus) and Lodbrok Capital LLP[752](index=752&type=chunk)[754](index=754&type=chunk) - The acquisition of Codecademy involved related parties, as Prosus held a significant equity stake in both Skillsoft (**37.5%**) and Codecademy (**23.8%**), with the transaction approved by Skillsoft's audit committee and board without Prosus-affiliated directors' participation[757](index=757&type=chunk) - The Klein Group, LLC, an affiliate of director Michael Klein, was engaged as a consultant for the Codecademy transaction and was paid a transaction fee of **$2.0 million**[640](index=640&type=chunk)[758](index=758&type=chunk) [Principal Accountant Fees and Services](index=242&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) This section details fees paid to Ernst & Young LLP for fiscal years 2022 and 2021, with all services pre-approved by the Audit Committee Accountant Fees (in thousands) | Fee Type | 2022 | 2021 | | :--- | :--- | :--- | | Audit fees | $3,195 | $3,310 | | Tax fees | $2,211 | $2,700 | | **Total** | **$5,406** | **$6,010** | Part IV [Exhibits and Financial Statement Schedules](index=242&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section incorporates financial statements from Item 8 by reference, noting the omission of schedules and referring to the Exhibit Index for filed exhibits - The financial statements required by this item are incorporated by reference from Item 8 of the Annual Report[763](index=763&type=chunk) - All financial statement schedules have been omitted because they are not required, not applicable, or the information is included elsewhere in the report[763](index=763&type=chunk) [Form 10-K Summary](index=244&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company indicates that there is no Form 10-K summary - None[765](index=765&type=chunk)

| --- | --- | --- | --- | --- | --- | |-------|-------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | DISCLAIMER FORWARD LOOKING STATEMENTS This document includes statements that are, or may be deemed to be, "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created by those laws. These forward-looking stat ...

Financial Data and Key Metrics Changes - Bookings for Q3 were $169 million, up $12 million or 7% compared to the prior year, with year-to-date bookings at $453 million, an increase of $37 million or 9% [35] - GAAP revenue for Q3 was $171 million, with year-to-date combined GAAP revenue at $401 million; adjusted revenue for Q3 was $179 million, an increase of $10 million or 6% over the prior year, and year-to-date adjusted revenue was $521 million, an increase of $4 million or 1% [36] - GAAP net loss was $43 million for the quarter, with a year-to-date combined GAAP net loss of $104 million; Q3 adjusted EBITDA was $49 million, flat to the prior year, with a year-to-date adjusted EBITDA of $130 million, down $4 million or 3% compared to the prior year [38][39] Business Line Data and Key Metrics Changes - Bookings for Skillsoft content in Q3 were $78 million, an increase of $5 million or 6%, with year-to-date bookings at $181 million, an increase of $10 million or 6% [41] - Bookings for Global Knowledge in Q3 were $62 million, an increase of $6 million or 11%, with year-to-date bookings at $190 million, an increase of $29 million or 18% [44] - SumTotal bookings were $29 million, an increase of $1 million or 3%, with year-to-date bookings at $82 million, a decrease of $2 million [45] Market Data and Key Metrics Changes - The addressable market for corporate digital learning is estimated to be $28 billion, growing at 10% annually, with 76% of IT decision-makers facing critical skills gaps [22][20] - 56% of IT managers plan to address skills gaps with training, indicating a strong demand for learning solutions [21] Company Strategy and Development Direction - The company is focused on six key pillars for growth: content leadership, platform leadership, go-to-market leadership, operational excellence, disciplined M&A, and a culture of leadership and learning [23] - The migration to the Percipio platform is on track, with 86% of annual recurring revenue on Percipio or dual deployment, up from 81% last quarter [17][26] - The company plans to continue investing in driving top-line growth, both organically and through M&A [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the size and growth of the corporate digital learning market and the company's ability to execute its strategy [15] - The company is raising its bookings outlook for the year to $700 million to $720 million and increasing the bottom end of its adjusted revenue outlook to $685 million to $700 million [47][48] Other Important Information - The company has made significant progress in integrating content from Skillsoft and Global Knowledge, more than doubling its tech and dev collection to 8,000 courses [25] - The company has entered into strategic alliances with partners like Udemy and Good Habits to enhance its content offerings [19] Q&A Session Summary Question: On Global Knowledge's growth trajectory - Management noted that while easier comparisons from COVID contributed to growth, Global Knowledge is on a growth trajectory with improved margins due to a shift to virtual training [55] Question: On sales hiring and team performance - Sales hiring has gone well, with a focus on training and development rather than increasing the size of the salesforce [63][64] Question: On bookings increase and guidance - Management confirmed that both new customers and existing customers are contributing to the increase in bookings, with dollar retention rates moving up [68] Question: On demand driven by turnover and skills gaps - Higher turnover is creating a need for learning and development, which is seen as critical for employee retention and filling skills gaps [71][72] Question: On competitive dynamics - Management expressed confidence in the competitive environment, highlighting the company's scale and integration of offerings as key advantages [80][82]